As the World Economic Outlook projects global growth to pick up to 3.4 percent in 2020, investors in the region are keen to understand how the dynamic business and political landscape will impact their investment decisions next year.
Fueled by an improvement in economic growth in a number of emerging markets including the Middle East, investors playing in the regional economies are closely monitoring and analysing the macro trends while spotting the right future opportunities to invest in.
This comes against a backdrop of the never-ending standoff between two of the world’s leading economies – China and the United States of America, which analysts say could slow down the much-needed growth.
Anita Yadav, Chief Executive Officer, Century Financial, highlighted factors such as slowing economies and ballooning global debt, which means the central banks will not be able to raise interest rates as a factor directly affecting the growth.
This, according to Yadav, is primarily because a half percent increase in interest rate will most likely give the same results as a two percent increase in interest rate it gave 10 years ago, simply because the magnitude of debt is more.
“The time of double-digit interest rates is gone. As an investor, what this means is that the risk-return on your portfolio is probably going to be in the low single-digit in the next decade versus what you were used to before which was either a high single-digit or double-digit. Therefore, get used to low return on investments,” Yadav said.
An aging demographic is another crucial area of concern for investors looking to reap good returns in the future. In 2018, the number of 65-year olds and above surpassed the number of five-year-olds in the world – a first in history.
“In another 30 years, 17 percent of the global population will be over 65. As investors, this means that in order to get favourable return on investments, you will need to invest in areas that elderly people have interest in. Sports channels, entertainment, healthcare and things that come with innovation and biotechnology are probably the sectors that will do well in the long-term,” she added.
Yadav also urged investors to focus on sector trends that resonate well with an ageing population.
Michael Hewson, Chief Market Analyst, CMC Markets (UK) said the US elections, an agreement with China and oil prices, as three key risk factors that will determine the global growth outlook in 2020.
“While we are optimistic about a good economic outlook in 2020, we cannot ignore the underlying risks that could water down the gains. We know the dollar is a key growth driver but the upcoming US elections and the long-awaited China-US agreement are factors that investors are keenly monitoring. On its part, it would be on OPEC’s best interest to keep the oil prices stable because the global economy cannot absorb higher oil prices vis-a-vis the global growth trajectory,” he added.
According to Hewson, a Brexit deal in January will also significantly boost the European markets, cushion economies from its burgeoning debt levels and lack of coordinated fiscal policies within the European Union region as well as lack of reforms in the banking sector.
Other key macro trends that are expected to play a role in global economic growth included oil prices, a high-yielding US dollar, fin-tech, cryptocurrency, technology, globalisation of services and information and age-old trade agreements that need to be reassessed.